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A little thought experiment on fair trade: Suppose there are two countries, A and B. A has a competitive advantage at making a. B has a competitive advantage at making b. Neither has any tariffs, so A makes its own a and buys b from B. B makes its own b and buys a from A.
One day, B decides to put a tariff on a, such that the cost of making a in B less than the cost of importing a from A. In the short run, the people of B suffer from higher prices, but this tariff can be redistributed into B's economy. A also suffers from selling less a.
Eventually, as a result of its protected market encouraging domestic production of a, B attains competitive advantage in a, exceeding A's. Now A buys both its b and a from B, making nothing itself. In order to finance its purchase of a and b from B, it sells natural resources.
B, having developed competitive advantage in a and b, declares that it is for free trade once again and removes the tariff on imports of a into B. A and B are trading freely. B is a developed manufacturing nation, while A is a supplier of natural resources to B.
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